Modeling Volatility Spillovers Between Stock Returns, Oil Prices, And Exchange Rates: Evidence from Russia and China

Abstract

This study investigates the interdependence between crude oil fluctuations and stock return dynamics of major oil BRICS stock market returns namely China and Russia, over the last turbulent period ranging from September 2001 to March 2019. We used a VAR-GARCH model that allows for simultaneous spillover in volatility and return, under the Student's tdistribution. In addition to crude oil prices, foreign exchange rates are so included in the model to strengthen its explanatory power. The results revealed that the Chinese and Russian markets are sensitive to their past own shocks and past own conditional volatility. Furthermore, the fundamental matter more than news in these markets. In contrast, considering the Chinese market, we found that in the long-run future volatility cannot be predicted by conditional crude oil and its foreign exchange rate volatilities. Similarly, the Russian market is insensitive to the foreign exchange rate and crude oil. Our findings are useful for regional and international investors needing forecasts of oil BRICS stock market futures volatility to optimize investment choices.

International and Russian Experience in Applying Evidential Policy Instruments in the Sphere of Public Administration: Issues of Continuity in Sectoral Balance

“…The above examples show that the evidence-based approach is not only viable, but provides a real opportunity, based on accurate data and their scientific justification, to improve the quality of life of the population, as well as counteract the protracted problem of a socio-economic nature. Based on this idea, it would be legitimate to conclude that the use of this approach in the economic direction will have a positive effect, in particular, for the purposes of sectoral balancing, which is relevant for our time 15 . The instrumental foundation for achieving this goal already exists in international practice, involving, at the same time, the entire public management, and not just a separate political component.…”